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Commercial Rent Arrears Recovery on Hold

Under centuries-old common law principles commercial landlords have been able to “distrain”, or seize tenants’ goods, without the need for a court order, and sell them to recover arrears of rent. The right to distrain arises as soon as rent becomes overdue and is a self help method used for recovering unpaid rent. However the method is considered draconian and has long been prohibited in relation to residential property. The Tribunals, Courts and Enforcement Act 2007 was expected to stop distress in relation to commercial leases and accordingly it introduced a different method to deal with unpaid rent known as Commercial Rent Arrears Recovery (“CRAR”).

However, it now seems that the introduction of CRAR is to be delayed in light of the announcement by the Justice Minster, Bridget Prentice, who suggested that the implementation of the procedure may be postponed until April 2012.

Part 3 the Act contains the new CRAR procedure. Many landlords do not like the effects of CRAR as it significantly reduces the their rights with regards to distress for landlords, because it requires them to give their defaulting tenants advance notice of the proposed seizure of goods before the CRAR procedure can be used. Further it will also limit the circumstances in which distress can be used.

The Act received Royal Assent over two years ago, however CRAR needs further regulations (not yet introduced) to be implemented before it will be fully functional. Until the regulations are passed landlords can continue with the current regime of distress given that the announcement by Justice Minister, Bridget Prentice, seems to indicate that there are no imminent plans to implement CRAR. Ms Prentice did not directly refer to CRAR in her speech however she did state that a consultation process would be commenced shortly in relation to Part 3 of the Act, which contains the CRAR provisions, with a view to implement the changes in 2012.

It therefore seems that CRAR will not be implemented before the general election and, if we do not see a Labour victory, there must be serious doubt as to whether CRAR will be implemented at all.

Commercial landlords might therefore have some grounds for celebration or at least some grounds for considering how they might vote!

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